Technology Strategy

for Managers and Entrepreneurs

Chapter 9
Trade Secrets, Trademarks,
and Copyrights

9-1
©2009 Prentice Hall
 Learning Objectives
1. Identify the role that secrecy plays in protecting intellectual
property
2. Explain when secrecy tends to be an effective mechanism for
deterring imitation
3. Define a trade secret
4. Explain why non-disclosure agreements are an important part of
efforts to maintain trade secrecy
5. Define a copyright
6. Describe how a copyright is obtained
7. Define a trademark
8. Describe how a trademark is obtained
9. Explain the major differences in intellectual property across
countries, and their effect on technology strategy

9-2
©2009 Prentice Hall
 Secrecy
• Prevention of imitation can be obtained by
keeping things secret and reducing the
diffusion of information about products or
services or how they are produced

9-3
©2009 Prentice Hall
 When Does Secrecy Work?
• When there are few sources of the information about the
new product or service
• When a new product or service is complex
• When the process of creating a new product or service is
poorly understood
• When the information that is being kept secret involves
tacit knowledge – the knowledge about how to do
something that is not documented in written form
• When there are limited numbers of people capable of
understanding the information that is being kept secret
• Works better for processes, inputs, and materials than
for products that are observable-in-use
9-4
©2009 Prentice Hall
 Trade Secrets
• Trade secrecy is a special case of all
efforts to keep a new product or service
secret
• Trade secrecy laws provide for legal
remedies if someone benefits from one’s
trade secret without one’s consent

9-5
©2009 Prentice Hall
 Conditions to Have a Trade Secret

• Three conditions must be met for the

courts to hold that something is a trade
secret:
1. The information must be known only by
people in the company
2. The information must have economic value
3. Must take reasonable measures to keep
the information secret

9-6
©2009 Prentice Hall
 Secrecy as a Strategy
• Offers a longer time horizon of protection and it does not disclose
information to competitors
• If the product is well suited for secrecy
• Generate customer interest because people are more interested in
things that they can’t know about than things that they can
• Requires the adoption of secrecy policies
• Delay the efforts to work with other companies
• Inhibits efforts to sell products to many business customers, who
need to know about new products long in advance of their release to
fit them into their own plans
• Risks the independent discovery and exploitation of the inventions

9-7
©2009 Prentice Hall
Trade Secrets Versus Patents

9-8
©2009 Prentice Hall
 Non-Disclosure Agreements
• Trade secrecy is enhanced by having
employees sign a legal document called non-
disclosure agreements that must:
 Specify exactly what information is to be kept secret
 Provide consideration - employees must receive
something of value, like their salaries, in return for
non-disclosure
 Specify legitimate uses for the information
 State what must be done with any documents or
materials that are transferred to the employee, both
during employment and after the termination of an
employment relationship
9-9
©2009 Prentice Hall
 Enforcing Non-Disclosure
Agreements
• Many companies are willing to sue the
employees and others who help them
because the only remedies for violation of
non-disclosure agreements come through
legal action

9-10
©2009 Prentice Hall
 Non-Compete Agreements
• Trade secrecy is enhanced by having the
employees sign non-compete
agreements, which bar them from working
for competitors for a period of time after
their employment has ended

9-11
©2009 Prentice Hall
Enforcing Non-Compete Agreements

• Non-compete agreements help to protect

the company’s intellectual property, but
they are hard to enforce
• Need to be of limited length and limited
geographic breadth because they will be
declared invalid if they keep people from
earning a living in their chosen field

9-12
©2009 Prentice Hall
Non-Disclosure/Non-Compete
Agreement

9-13
©2009 Prentice Hall
 Ownership of Intellectual Property

• The rights to technologies that employees

develop during their employment at a
company reside with employees unless
the company require them to assign the
rights to them

9-14
©2009 Prentice Hall
 Copyrights
• Copyrights give the authors of original
works the right to distribute, duplicate and
provide derivations of that work, and to
preclude others from doing the same

9-15
©2009 Prentice Hall
 What Can Be Copyrighted?
• A variety of things can be copyrighted:
 Literary works
 Dramatic works
 Audio and video recordings
 Computer software
• Works composed of common property cannot be
copyrighted along with:
 Intangible things
 Titles, names and slogans
 Ideas
 Methods
 Principles
9-16
©2009 Prentice Hall
 Who Gets a Copyright and
How Do They Get It?
• A copyright can be obtained:
 By the author of any completed original
artistic, literary or musical work, unless the
work is done for hire, then the copyright goes
to the entity commissioning the work
 By putting the work into tangible form or by
registering the work at the USPTO
• Registration provides the right to sue for
copyright infringement
9-17
©2009 Prentice Hall
Enforcement Through Litigation
• Courts usually conclude that copying has
occurred if the new work is substantially
similar to the copyrighted work, and the
defendant had access to the copyrighted
work
• The statute of limitations on copyrights
only lasts three years

9-18
©2009 Prentice Hall
A Copyright Application Form

9-19
©2009 Prentice Hall
 Recent Developments to
Strengthen Copyrights
• File-sharing software poses an important threat to
copyrights on recorded music, and its rise has led
to a number of infringement lawsuits
• Recent laws have strengthened the position of
copyright holders by allowing them to use physical
tools to prevent duplication of their work; however,
these physical tools have had problematic side
effects

9-20
©2009 Prentice Hall
Fair Use

9-21
©2009 Prentice Hall
 Software Copyrights
• Copyrights can be used to protect the source code,
object code, microcode and screen displays in software,
but not the ideas, mathematical formulas or equations
behind them
• Because it is impossible to show the exact link between
the expression of an idea and the process underlying it,
courts interpret the “look and feel” of software to evaluate
infringement
• Copyrights also are much easier to obtain than patents,
and are a much less expensive form of protection.
• Copyrights offer 70 years of protection from the time of
the author’s death, while patents offer only 20 years of
protection from the time of invention

9-22
©2009 Prentice Hall
 Trademarks
• Trademarks are devices to identify the
provider of a product or service
• Offer much less intellectual property
protection than patents, copyrights, or
trade secrets
• Do help companies to protect their brand
names

9-23
©2009 Prentice Hall
 What Can Be Trademarked?
• Trademarks can be obtained on any non-
descriptive, non-generic word, number, symbol,
phrase, color design, or even smell that
distinguishes the products and services of one
company from those of another
• The same mark can be used by more than one
company if that use will not cause confusion
amongst consumers about the provider’s
identity, and does not dilute the value of another
party’s trademark
9-24
©2009 Prentice Hall
 Obtaining a Trademark
• One can obtain a U.S. trademark by using
the mark, or by registering it with the
USPTO
• Registration facilitates the ability to obtain
similar rights in other countries and allows
the inventor to sue to enforce the mark

9-25
©2009 Prentice Hall
Many Companies Obtain a Large
Number of Trademarks

9-26
©2009 Prentice Hall
 Enforcing a Trademark
• Trademarks provide a negative right and
must be enforced through legal action,
which is often more difficult for start-ups to
undertake than for established companies
to conduct
• Trademarks are lost through
 Cancellation proceedings
 Abandonment
 If they take on generic meaning

9-27
©2009 Prentice Hall
 Domain Names
• The names used on Web sites to identify
an organization providing a good or
service
• They are protected through legal action

9-28
©2009 Prentice Hall
Use of Domain Names

9-29
©2009 Prentice Hall
 International Issues in
Intellectual Property
• There is no such thing as international
copyrights, trademarks, or patents
• These forms of intellectual property
protection must be obtained in each
country where a company would like to
obtain such protection

9-30
©2009 Prentice Hall
Top 20 Countries for
Patent Applications

9-31
©2009 Prentice Hall
 Differences in Intellectual
Property Regimes
• Major differences exist across countries in
laws governing patenting, including
whether they award patents to the first-to-
invent or the first-to-file, their policies on
the timing of disclosure, and their
requirement to manufacture

9-32
©2009 Prentice Hall
 First-to-Invent
• The United States is one of only two
countries in the world that awards a patent
to the first person to invent a technology
• Must prove that one invented the technology
before anyone else
• Failure to act quickly to apply for patents in
other countries may deter from obtaining
patents outside the United States

9-33
©2009 Prentice Hall
 Disclosure
• The United States allows inventors who
publish information about an invention up
to one year before applying for a patent to
be eligible to obtain one
• Many European countries, and in Japan,
prior publication at any time will keep
inventors from obtaining a patent

9-34
©2009 Prentice Hall
 Requirement to Manufacture
• The United States imposes no
requirement that an inventor actually
produce a product or service that uses the
patented invention within the country
• In many countries, one may obtain patent
protection only if willing to manufacture the
product in that country

9-35
©2009 Prentice Hall
 Intellectual Property in
Developing Countries
• Developing country governments often do not
enforce intellectual property laws vigorously
because companies in those countries generate
little value from intellectual property and
because weak intellectual property laws reduce
the cost of many products
• Weak intellectual property laws in developing
countries lead to widespread piracy, and require
companies to formulate strategies that are
effective under such conditions
9-36
©2009 Prentice Hall
 International Agreements on
Intellectual Property
• Several international agreements make it easier
to obtain intellectual property protection in
multiple countries
• The most important of these agreements are:
 The Berne Convention
 The Madrid Protocol
 The European Patent Convention
 The Paris Convention
 The Patent Cooperation Treaty
 The Trade-related Aspects of Intellectual Property
Rights Agreement
9-37
©2009 Prentice Hall